Sabic May Seek to Tap Debt Market as Soon as This Year, CFO Says

May 7 (Bloomberg) -- Saudi Basic Industries Corp. may tap
the debt market as early as this year as the world’s biggest
petrochemicals maker by market value seeks financing for
projects amid borrowing costs near record lows.

The state-controlled company is implementing projects
valued at 40 billion riyals ($11 billion) over the next few
years, Chief Financial Officer Mutlaq al-Morished said in Riyadh
today. “We will tap the market sometime late this year or early
next year,” he said. It’s too early to comment on the size of
the bond sale, which Sabic would prefer to be Islamic, al-Morished said.

The average yield on HSBC/Nasdaq Dubai’s GCC U.S. Dollar
Sukuk/Bond Index decreased 104 basis points, or 1.04 percentage
points, in the past year to 3.27 percent yesterday, 18 basis
points away from an all-time low on Jan. 10. The yield on
Sabic’s 3 percent securities due November 2015 has tumbled 288
basis points from a high in March 2011 to 1.44 percent today,
near the lowest on record.

Sabic, which in 2007 bought General Electric Co.’s plastics
unit for $11.6 billion as part of a global expansion drive, last
month said it plans to cut about 1,050 positions and close some
assets in Europe as the company responds to lower demand. First-quarter profit dropped 10 percent as production and sales at its
units declined.

When asked if Sabic’s purchase of GE unit was ill-timed
ahead of the global financial crisis, al-Morished said:
“Absolutely not. It’s a great deal. It’s doing fine and we’re
happy with it.”

Don’t Talk

Sabic joins peers including Akzo Nobel NV and BASF SE in
slimming down operations that are taking the brunt of a
prolonged slump affecting construction and infrastructure, as
well as consumer spending on cars and appliances. The company
also faces stiffer competition from a revived U.S. chemical and
plastics industry that’s benefiting from shale gas supplies.

Chief Executive Officer Mohamed Al-Mady told reporters on
April 20 that Sabic is interested in investing in the
petrochemicals industry in the U.S. and is studying investment
possibilities in North America. MEED reported in August last
year that the company is considering a “major acquisition,”
and magazine listed Huntsman Corp., Celanese Corp., Lanxess AG
and Arkema SA as potential targets.

“I have no idea where they get their reports,” CFO al-Morished said of the MEED report. “We always look for
opportunities but the last thing we do is talk about it.”